[Updated] Online tutoring platform becomes unicorn after series E

2 min read

Correction, June 01: This post originally stated Yuandaofu’s total valuation in RMB.

Yuanfudao (猿辅导), online tutoring services targeting the K-12 educational segment, announced recently that it has completed an E round worth US$ 120 million (in Chinese). The round, the largest in the sector in China and led by Warburg Pincus, has put the company’s valuation at US$ 1 billion in less than two years since its launch. Tencent also participated and was the sole investor in their series D+ of US$ 40 million.

Yuanfudao offers online tutoring services that help students from the elementary to high school level, with courses encompassing all subject areas including Chinese, English, math, history and biology.

Chinese parents, famous for resorting to every conceivable means in order not to “let their children lose at the starting line”, are more than willing to spend heavily on their children’s education. The easy access to online tutoring (thanks to the increased internet penetration) and cost-effective tutoring fees (the fee for each online course usually ranges from RMB 3 to RMB 399, with each course attracting participants ranging from one to thousands) have been luring Chinese K-12 students and their parents to companies like Yuanfudao.

There has been great demand for one-to-one online tutoring from test takers in tier-3 and tier-4 cities, where high-quality teachers are woefully inadequate in number. Yuanfudao has been building up top teacher talent pool by offering high salaries to their employees. Last year, the company engaged nearly 100 new teachers, with their annual pay ranging from RMB 200,000 to RMB 500,000.

Apart from the competitive teaching resources, the company also has a technical team of over 200 people, providing strong technical support for the online education service. Yuanfudao co-founder Li Xin says the core competitiveness of its teaching products is its data from their huge user base. This has made it possible for them to come up with diversified and differentiated courses to cater for customized needs.

These advantages have helped Yuanfudao solidify its status as a frontrunner in the K-12 online education sector over its rivals such as Zybang (作业帮), Xueba100 (学霸君) and 17zuoye (一起作业).

Yuanfudao reaped RMB 120 million in annual revenue at the end of 2016, CEO Li Yong earlier revealed. In 2016, there were 16,741 online courses completed, with a total attendance of 21.48 million, according to data released by the online tutoring service.

The investment in Yuanfudao is only one of the 23 investment deals made by Tencent over the past half year. With free cash flows worth RMB 24.23 billion, the internet giant has plenty to invest and has branched out into various sectors including the transportation, cultural and entertainment in H1 2017.

Tencent, which has been Yuanfudao’s investor since the company’s Series D+ last year, has also injected huge sums of money into several online education websites including koolearn.com (新东方在线), entstudy.com (疯狂老师), yitiku.cn (易题库) and ABC360.

The company that operates Yuanfudao is Beijing Zhenguanyu Technology (北京贞观雨科技有限公司). Since its founding in 2012, Zhenguanyu has launched various programs including Yuantiku (猿题库question database, Xiaoyuansouti (小猿搜题) question search, and Fenbi (粉笔) vocational exam training platform. The programs, conducted in various forms including live streaming and video replay, have attracted 160 million users, the company claims.

The company started to shift its business focus to Yuanfudao, the most profitable one among its various programs after it secured US$ 40 million in Series D+ backed by Tencent last year.

Prior to the Series E round, Zhenguanyu raised an aggregate US$ 123 million in four funding rounds from investors including Tencent, Matrix Partners China (经纬中国), IDG Capital Partners (IDG资本) and China Media Capital (华人文化产业基金).